In the House…. On Wednesday, the House passed a $54-billion tax package that expands individual and business tax credits and creates $17 billion in renewable energy incentives. The bill passed in a largely party-line vote, with the GOP balking over its failure to address the AMT and how the legislation proposed paying for such credits–namely, by closing the loophole that allows hedge fund managers and offshore corporations to dodge taxes. The package now moves to the Senate, where it faces an uncertain reception. On Thursday, bypassing a veto threat from the White House (which objects to a proposed $700 million cut in missile defense), members passed a $601 billion FY09 defense spending bill. Senate debate on the measure is expected in June.

The House also voted 324-84 to authorize the federal government to sue OPEC in U.S. court over alleged price fixing. In another overwhelming vote, the House unanimously backed legislation to provide $2 billion in tax breaks to military families.

In the Senate….Half the GOP bucked McCain and Bush on the war supplemental alongside their colleagues in an upset vote this week, approving the inclusion of additional domestic spending in the bill by an emphatic 75-22 margin. The measure approves, among other programs, a 13-week extension in unemployment insurance, low-income heating subsidies and–most conspicuously for the presidential race–Sen. Webb’s proposal to expand education benefits for veterans. (Absent from the vote, which came as a not-so-tacit rebuke of his own far less generous GI plan: McCain.) In a further signal of the current political clime, Republican senators also voted to block the administration from implementing new rules that would shift billions in federal Medicaid spending onto state governments. The war supplemental now returns to the House, where members have yet to approve the measure’s war-funding provisions.

Meanwhile that day, senators unanimously joined the House to support tax breaks for veterans and their families; the bill now heads to the White House for the president’s signature.

Also this week, Bush vetoed the farm bill, upon which Congress promptly voted to override him. Democrats pushed consideration of their election-year blueprint until after Memorial Day. The Senate Banking Committee approved a Dodd-Shelby housing compromise to help borrowers refinance their mortgages in fixed-rate plans insured through the Federal Housing Administration. So far, the White House has struck a tentatively conciliatory note on the legislation, which would be funded through a newly created affordable-housing fund.

At his fairly subdued Thursday hearing to confirm a new post as head of U.S. Central Command, Petraeus told Senate members that he might be able to recommend modest troop withdrawals from Iraq in the fall–somewhere in the arena of 3,000 soldiers. GOP grandstanding over FISA shifted slightly, as House and Senate Republicans offered a compromise allowing people who may have been illegally spied to sue in court–that is, in secret FISA court (not the federal court where cases are currently pending). The ACLU strenuously objects to the proposal, noting that the court could not determine whether the warantless wiretapping program itself was legal–only whether the attorney general had formally requested telecom companies’ assistance.

As oil prices hit a record $132 per barrel, House Republicans unveiled their energy policy agenda, calling for increased use of nuclear power, new oil refineries and drilling in ANWR. The DOJ released an exhaustive 437-page review chronicling the extent of the FBI’s internal opposition to White House interrogation tactics, with some agents previously going so far as to classify Guantanamo abuses as “war crimes.” In a culmination of many weeks of threats, the House subpoenaed Karl Rove, who in turn demurred through his lawyer, indicating he had little intention to appear for what Rep. Conyers last week suggested would be an “ass-kicking.”